Agricultural Input Subsidies in Pakistan: Nature and Impact

Abstract

Pakistan has a history of subsidising agricultural inputs. Although none of the agricultural inputs were subsidised during the early 1950s, the process was initiated in the second half of the decade by subsidising chemical fertilisers in order to popularise their use [Niaz (1984)]. The list of subsidised inputs and the rate structure of the subsidies were expanded considerably throughout the Sixties. Towards the end of the Sixties, it was noted that almost all the agricultural inputs including fertilisers, insecticides, seeds, irrigation water, tubewell installations, and the operation and purchase of tractors and tractor-related equipment were subsidised in one form or another [Aresvik (1967) and Kuhnen (1989)]. In the 1970s, some curtailment of subsidies occurred as a result of input price increases which followed the worldwide recession, a major oil shock, the credit crunch, the war with India, and the consequent steep devaluation of Pakistani Rupee [Chaudhry (1982)]. Although the subsidies had survived the onslaught of the Seventies and tended to persist on most inputs, the government became totally committed to their removal beginning with the 1980s, under pressures from the IMF and the World Bank [Government of Pakistan (1980)]. As a consequence, there was a total withdrawal of subsidy from seeds, insecticides, tubewells, and tractors. A phased-out withdrawal of fertiliser subsidy, culminating in 1984-85 in the case of nitrogenous fertilisers and in 1989-90 in the case of phosphatic and potash fertilisers, was also to be undertaken [World Bank (1986)].

Agrarian change, populism, and a new farmers' movement in 21st century Pakistani Punjab

“…State-led land reforms in the 1950s and 1970s were attempts to prod the "feudal" landed elite into intensive farming via adoption of mechanization (tractors and tube wells) and later the new high-yield seeds of the late 1960s (Herring, 1979). The state subsidized agriculture through explicit and implicit subsidies (Chaudhry et al, 1995): Implicit subsidies covered irrigation water rates, electricity rates, and agricultural credit, while explicit subsidies were extended for mechanization (including tube wells), new seed varieties, and synthetic fertilizers. The state also regulated prices of key food and cash crops (wheat, rice, sugarcane, and cotton) to incentivize their production and ensure food security.…”

“…192–194) argued that productivity gains from the Green Revolution enabled lower‐middle rural households to increase their share of total income relative to the richer 50% of households between 1959 and 1972. Additionally, Chaudhury et al (1995, p. 715) summarize research showing that “small farmers compared favourably with large farmers in the use of fertiliser during the late Seventies but lagged behind large farmers during 1980‐81 when fertiliser prices were raised by nearly 50 percent,” pointing to similar declines in water usage when rates increased. State subsidies thus prodded the development of capitalist farmers while also supporting peasant production.…”

Contesting Agricultural Markets in South Asia: Farmer Movements, Co-operatives and Alternative Visions

“…4. Chaudhry and Sahibzada (1995) provide a detailed reading on the evolution of agricultural subsidies in Pakistan. 5.…”

Pakistan’s Agricultural Development since Independence: Intertemporal Trends and Explanations

“…In addition Table 7 Extent of Underpricing of Agricultural Commodities andResource Transfers from Agriculture, 1979-80 to 1994-95 Nominal . Chaudhry and Maan (1993) and Chaudhry and Sahibzada (1995)]. Nominal protection coefficients represent the ratios of procurement to the corresponding import/export parity prices and net transfers equal to gross transfers minus subsidies and government expenditure on agriculture and water.…”